Question: Kate's Mini - Mart uses a periodic review, order - up - to inventory model to manage inventory. For one of their more popular products,

Kate's Mini-Mart uses a periodic review, order-up-to inventory model to manage inventory. For one of their more popular products, Tofu Jerky, Kate (the owner) insists on maintaining a 80% cycle service level. Kate buys Tofu Jerky for $1.00 per pack and it sells for $3.50. It costs Kate $0.10 per pack per week to hold inventory. The supplier has a 2 week lead time (with no randomness). Average demand is expected to be 30 per week. Standard deviation of forecast errors is expected to be 6.(Please use the Gamma distribution to model demand during the exposure period.) Kate orders every week. Suppose a slick consultant convinces Kate that she should use a fill rate service level target rather than cycle service level to set inventory control parameters. Which statement best describes the change in inventory levels that would happen if Kate decides to stop using the 80% CSL target and instead use a 98% fill rate target.
Group of answer choices
None of the above
Safety stock would decrease and cycle stock would decrease
Only safety stock would increase
Safety stock would increase and cycle stock would decrease
Only safety stock would decrease

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